Trump eyes a win with SK deal
PRESIDENT Donald Trump is on the verge of securing his first major trade deal, leveraging the threat of tariffs to gain concessions from South Korea on exports of steel and imports of US cars.
The deal comes at a moment of heightened tension on the Korean Peninsula as the Trump administration prepares to hold talks with North Korea’s leader, Kim Jong-un. Ties between Washington and Seoul had become strained over disagreements about trade, including Trump’s steel tariffs, and threatened to further complicate the already fraught discussions with North Korea.
The finalisation of a trade agreement with South Korea would hand Trump a victory in his “America First” approach to trade, in which he has threatened to take tough trade action unless other countries agree to concessions, including a reduction in the gap between what they export to the United States and what America exports to their shores.
The blanket steel and aluminium tariffs announced by the White House this month are the most recent example of that blunt approach, with the White House using exemptions and revisions as a carrot to avoid the tariff stick.
“I think the strategy has worked, quite frankly,” Steven Mnuchin, the Treasury secretary, told Fox News in an interview on Sunday. “We announced the tariff. We said we were going to proceed. But, again, we said we’d simultaneously negotiate.”
“I think this is an absolute win-win,” he added, referring to the agreement with South Korea.
The South Korean government announced the deal on Monday.
“It looks like we’re going to have a good result on that,” Peter Navarro, Trump’s trade adviser, said of the South Korea deal on CNBC on Monday.
It remains to be seen whether the revised pact will be enough to satisfy lawmakers and industries that have been critical of South Korea’s trading practices. Among the biggest concerns have been access to its markets for US exports of automobiles and agricultural products.
The reduction of trade deficits have been a priority for the United States; in 2016, it had a $17 billion trade deficit with South Korea.
In a statement published on Monday, the South Korean Trade Ministry said it had agreed to adhere to a quota of 2.68 million tonnes of steel exports to the United States a year, which it said was roughly equivalent to 70 percent of its annual average sent to the US from 2015 to 2017. It also agreed to lower trade barriers to vehicles imported from the United States. Trump administration officials cited what they considered unfair barriers against US-made cars when they began last year to pressure South Korea to amend the trade pact.
In return, the Trade Ministry said, South Korea would be exempt from the steel tariffs.
Under the deal, the number of vehicles the United States can export to South Korea without meeting local safety requirements would double to 50,000.
Cars are a major reason for Seoul’s trade surplus with Washington. Brands like Hyundai and Kia have found ready markets in the United States, but the big US automakers have complained that restrictions keep them from trying to make the same headway in South Korea.
The agreement is also expected to allow the United States to extend the tariffs that it imposes on Korean pickup trucks to 2041. The tariffs are currently scheduled to be phased out in 2021.
Kim Hyun-chong, South Korea’s trade minister, told journalists on Monday, however, that there would be no further opening of his country’s agricultural markets, and no changes to tariffs that had already been lifted.
The Trump administration suggested last week that the deal with South Korea was nearing completion as it unveiled the new tariffs targeting China.
Trade experts said that while the concessions were a win for the Trump administration, they would most likely do little to dent the trade deficit and that South Korea was probably happy to have the negotiations behind them after the United States briefly flirted with withdrawing from the pact.
Washington and Seoul began negotiations in January on changes to the 6-year-old trade agreement, one that Trump had previously called a “horrible deal.”
“I’m happy that they can take this off the table as another trade policy irritant,” said Dan Ikenson, a trade expert at the Cato Institute who argued that the administration’s trade policies and focus on trade deficits are out of sync with economic reality. “This administration happens to believe, and it’s a fairy tale, that bilateral trade accounts matter.”